FTX files for bankruptcy
FTX filed for bankruptcy protection in the U.S. and Sam Bankman-Fried resigned from his role as CEO, according to a message published by the company on Twitter.
FTX and about 130 other affiliated companies have started bankruptcy proceedings. This will allow the companies to continue working while they develop a plan to repay debts to creditors. Sam Bankman-Fried has stepped down as CEO and has been succeeded by John J. Ray III.
The company’s problems began in November, when an investigation conducted by CoinDesk revealed that FTX is illiquid. After that, its clients began to withdraw their assets. In just three days, approximately $6 billion was withdrawn.
For this reason, FTX had to turn to Binance for help. At first, Binance’s management agreed to support FTX, but after studying all the problems of the company and amid the news about the misappropriation of assets of the clients and a possible investigation by US regulators, Binance reversed its decision to bail the exchange out from a cash shortage.
Afterwards, Bankman-Fried said that the company would need $8 billion in financing to save customer funds and rescue the business. He also reached out to the Huobi and Kraken exchanges for help, but didn’t achieve a positive result.
Apart from that, later in the day the word got around that Bankman-Fried realized the losses of Alameda Research using the funds of FTX users. He used about $4 billion.
In the wake of these events, Bitcoin reached a local minimum. On November 9, its price dropped below $16,000.
Binance’s CEO Changpeng Zhao considers that the situation at hand is very similar to the financial crisis that occurred in 2008, when many companies suffered. Due to the instability in the crypto market, he adopted the decision to increase the size of the emergency insurance fund to $1 billion. However, Zhao believes that the cryptocurrency market will recover in the end.
FTX ranked 5th in terms of daily traded value. It was considered the exchange with the lowest commissions.